Now that you’ve proven your great small business idea is a great small business, what’s next? Your business plan may already account for diversification, or it may have never occurred to you. Either way, consider ways to diversify your business to stay ahead of the game.
Diversification is a buffer against slowdowns
You may have perfected a certain product or service that your customers love, but what happens when demand drops? As a rule, customers love variety and innovation. If your coffee shop has offered the same four styles of coffee and same four pastries for years, of course the new place down the street will attract some of your customers.
Resting too heavily on your laurels can leave you unprepared in a changing market. Diversify your products or services and you’ll stay competitive in times of reduced customer demand or economic slowdowns.
Planning your small business diversification
When planning ways to diversify your small business, ask yourself two things: 1) Does it make sense for my business? and; 2) Will it be profitable? Offering small, easy breakfasts at your coffee shop might make sense, but opening a dog grooming centre won’t (that’s not to say, however, that opening a second separate dog grooming business is a bad idea).
As we always like to say at GoForth Institute – do your research! What are your customers asking for, either directly or indirectly? What are your competitors doing to stay appealing? What trends is your industry loving – or hating?
Ways to diversify your business
Here are a few ways you can diversify your small business:
- Target new markets – Some customers might not care so much about your coffee shop’s amazing lattes, so why not become experts in tea as well? Get creative and look for markets that complement your own.
- Consider partnering – What opportunities are out there for partnership with companies related to your business, but not directly competing? Back to the coffee shop example – getting involved as a coffee supplier for local events will expose your killer espresso to people who may not have heard of you before.
- Go out of your “comfort zone” altogether – Were you the first to introduce fair-trade coffee beans in your town? Do you know everything about espresso? Why not offer your expertise outside the coffee shop? Consider speaking engagements on the importance of fair trade, consulting services to other cafés looking to make the switch, or offering “espresso-at-home” lessons to private groups.
- Go virtual – Can you use technological solutions or the internet to increase your business? Perhaps you can sell your café’s special roast online, or even your favourite coffee-related products.
Diversification in small business is often tricky to figure out, but infinitely rewarding. Not only will you have a bit of protection against reduced demand, but you’ll be learning a thing or two as well. As always, plan everything out on paper first, consult your advisors and – most importantly – have fun!